But is the Easter bunny at work once again?
- Saxony April CPI +0.9% vs +0.5% m/m prior
- Brandenburg April CPI +0.8% vs +0.4% m/m prior
- Bavaria April CPI +0.7% vs +0.5% m/m prior
- Hesse April CPI +0.9% vs +0.5% m/m prior
- North Rhine Westphalia April CPI +1.0% vs +0.4% m/m prior
- Baden-Wuerttemberg April CPI +1.0% vs +0.3% m/m prior
The headlines look pretty on paper and the issue with preliminary readings is that they don't come with very much details. The only real look that we have on what is causing an uptick in inflation here is the Saxony report. As noted earlier, the core reading also showed a jump from +1.1% y/y in March to +1.7% y/y in April.
The issue with March and April readings for inflation pressures in the Eurozone is that they tend to be heavily skewed by Easter seasonality. Remember this last year?
This year Easter falls in late April so one should expect the opposite effect to that of Easter in late March (as we saw last year), which means that inflationary pressures should tick higher. Looking at the details of the Saxony report, there was a notable jump in the following items: transportation (+1.6% m/m), leisure & entertainment (+3.5% m/m), package holidays (+15.9% m/m), hotels & restaurants (+0.7% m/m) but the skew is even more evident in the year-on-year readings (shown below).
It's hard to really come to a solid conclusion based on one state's details but if anything else, the Saxony report has in the past provided a rather accurate account of how inflationary pressures behave in the region.
And this points to the Easter bunny working its way into the data once again (or at least playing a significant part), resulting in the heavy upside bias in the reports earlier.
